Hyatt Hotels Corp (H) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2015 Hyatt Hotels Corporation earnings conference call. My name is Simon, and I will be your operator for today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Amanda Bryant, Director Investor Relations. Please proceed.

Thank you, Simon. Good day, everyone, and thank you for joining us for Hyatt's fourth quarter 2015 earnings call. Here with me in Chicago is Mark Hoplamazian, Hyatt's President and Chief Executive Officer, and Atish Shah, Hyatt's Interim CFO. Mark is going to start by discussing the progress we're making toward our long term strategic goals, and he will turn it over to Atish to provide details on our financial performance during the quarter and current expectations. Then we'll take your questions.

Before we get started, let me remind everyone that certain statements made on this call are not historical facts are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued earlier this morning, along with the comments on this call are made only as of today, February 18, 2016, and we undertake no obligation to publicly update any of those forward-looking statements as actual events unfold.

You can find a reconciliation of non-GAAP financial measures referred to in our remarks, and on our website at Hyatt.com under the press release section of our Investor Relations link, and in this morning's earnings release. An archive of this call will be available on our website for 90 days per the information included in this morning's release. With that, I'll turn it over to Mark to get started.

Thanks, Amanda. Good morning, everyone, and welcome to Hyatt's fourth quarter 2015 earnings call. This morning, I would first like to talk about our fourth quarter and our full year 2015 results, and how those results reflect continued execution of our long-term strategy. Following that, I'll discuss one of the key components of our strategy, our select service brands, Hyatt Place and Hyatt House. And then I'll turn it over to Atish to walk through details of our results for the quarter and our outlook for 2016.

Before I go into our results, I just want to take a moment to tell you about our new CFO. Following an extensive search, we announced the appointment of Pat Grismer as Hyatt's new Chief Financial Officer reporting to me. He will officially start on Monday, March 14. While it took us some time to conclude the search, we are thrilled to have found someone who not only has great skills and experience and capabilities, but also fits our leadership profile very well.

Pat joins us from Louisville-based Yum! Brands where he served as CFO since 2012. His experience in global consumer-facing multi-brand businesses is a great fit, as we continue to strengthen the brand focus at Hyatt. His knowledge of franchise operations and deployment of shared services around the world will directly support us, as we continue to grow our presence globally.

I also want to take a moment now to acknowledge and thank Atish for his great leadership of our finance function over the past 10 months. He's been a great partner to me. His support of the executive team, and of the Company overall has been remarkable. Atish will continue to lead the investor relations and financial planning and analysis functions, and will be engaged in various initiatives that are under way at this time.

So as to results. As you can see, we, from the results that we announced this morning, our business continues to perform well, and we expect another year of growth in 2016. In 2015, adjusted EBITDA increased nearly 13% after adjusting for foreign currency translation, and the net impact of transactions that occurred in 2014 and 2015. We realized strong growth in our base business in owned and leased hotels, as well as our management and franchising operations.

Concurrently, we tightly managed SG&A over the course of the year. These strong results reflect continued growth in RevPAR, particularly in the Americas. This revenue growth, along with continuous focus on operating with excellence drove 70 basis points in margin gains in our comparable owned and leased portfolio in 2015. At the same time, management and franchise fees grew by more than 13% in 2015 after adjusting for foreign currency.

We opened 49 new hotels in 2015, representing the highest number of organic hotel openings in a single year since our IPO. As important as the total number of hotels we opened, I'm thrilled that these openings introduced Hyatt into 21 new markets around the world. At the end of 2015, our base of executed contracts stood at approximately 56,000 rooms and 260 hotels. This base of executed contracts has increased over the past year, in the context of 8% net hotel growth compounded over the last three years with an increasing opening pace over that time period.

We maintain a strong liquidity position, and we believe this flexibility allows us to be opportunistic. We believe this is a key competitive advantage, as we head into a period where we could see more opportunities to grow in key gateway cities and resort markets. Now let me briefly cover our fourth quarter results.

Our overall business remains strong, particularly driven by strength in the Americas region. In the fourth quarter, we reported comparable constant dollar systemwide RevPAR of 3.8%, with full service hotels in the Americas up 5.4%. RevPAR for our select service hotels in the Americas was up 6.4%, compared to the same period in the prior year, with a majority of that increase coming from rate growth. We estimate that the shift in the timing of Yom Kippur favorably impacted RevPAR by about 40 basis points in the quarter, at our comparable full service US-managed hotels.

Transient room revenue at comparable US full service hotels increased 4.8% in the quarter. Strong transient markets included San Francisco and Boston. We saw continued weakness in New York City in the quarter. RevPAR across our portfolio there was roughly flat, as new supply and weaker international visitation continued to negatively impact results. Even though we saw RevPAR weakness in New York, we were able to grow market share as measured by RevPAR index over the course of 2015.

Group rooms revenue at comparable US full service hotels was up over 8% in the quarter. An estimated 100 basis points of this growth was due to the timing of Yom Kippur. Group rates were up over 6% in the quarter, the sixth straight quarter of increases in group rates. Now I'd like to cover results in our other regions.

Our hotels in EAME Southwest Asia region experienced a 4% RevPAR decline on a constant dollar basis in the quarter. The economies in the region remain mixed. We saw weakness across Europe, France in particular, as a result of a reduction in travel following the terrorist attacks in Paris on November 13. Our hotels in France reported a roughly 24% RevPAR decline in December.

We expected these effects -- we expect these effects to linger through the first half of 2016. Our outlook for RevPAR performance for our hotels in Paris in 2016 is also impacted by renovation activity at some of the hotels. For reference, about 2% of our overall adjusted EBITDA for the Company comes from our hotels in Paris.

The Middle East experienced a decline in demand, related to ongoing geopolitical instability in the region, and reduced government spending. Separately, India remains a bright spot with RevPAR growth in the mid single-digit percentage range. Asia Pacific region RevPAR increased 2.1% on a constant dollar basis in the quarter. Northeast and Southeast Asia saw growth in the low single-digit percentage range, with particular strength in Japan. However, market conditions remained weak in Hong Kong which drove a slight RevPAR decline at our hotels there. This was driven primarily by the reduction in visitation, and the strengthening of the Hong Kong dollar against the renminbi which hurt demand.

Our RevPAR results in China varied by sub region. North and West China were down in the low single-digit range, while East and South China were up in the low single-digit range. Overall, China excluding Hong Kong and Macau was up in the low single-digits percentage-wise in RevPAR in the quarter and for the full year, both on a constant dollar basis. Macau RevPAR was flattish in the quarter, versus a double-digit RevPAR decline for the overall market. Seoul experienced continued weakness resulting from supply growth, which resulted in low single-digit RevPAR declines in the quarter on a constant dollar basis.

We opened 12 hotels in the quarter, bringing our total to 49 hotels in 2015. Our pace of openings is expected to increase further in 2016, as we expect to open more than 60 hotels this year. Our current executed contract base represents approximately 35% of existing rooms, supporting a strong opening pace in the years ahead. Of the hotels we plan to open this year, over one-half will be select service hotels which is a testament to the strength of our Hyatt Place and Hyatt House brands. We also have a robust opening schedule for full service hotels in markets is such as Denver, Scottsdale, Rio de Janeiro and Abu Dhabi.

As we have stated in the past, expansion into new resort markets is a key part of our strategy. As part of the strategy, we have successfully expand our presence in all-inclusive resorts in 2015, with the fourth quarter opening of the Hyatt Ziva in Cancun, bringing the number of all-inclusive resorts in our portfolio to six. Our growth in resorts increases our leisure offerings to our guests, and is of great importance to our Hyatt Gold Passport program, as Gold Passport members have more choices for their holiday stays, some of which will be through the redemption of points.

At the end of 2015, we had a total of 57 resorts, including six all-inclusive resorts in our system. Looking forward, we remain focused on opening high quality high end resorts in great leisure destinations. For example, the Park Hyatt Mallorca and Park Hyatt St. Kitts are expected to open in 2016. And we have two exciting new Andaz resorts coming online, one in Scottsdale, Arizona later this year, and the other in Riviera Maya, Mexico by early 2017.

Leisure demand was strong in 2015. The comparable resorts in our system reported RevPAR growth of more than 6.5% in constant dollars in 2015, exceeding our systemwide RevPAR growth of 5.5%. As to our lodging fees, management and franchise fee growth continues to be a key component of our long-term earnings growth. Our fourth quarter results highlight that our fee growth is very strong, and continues to benefit from overall RevPAR increases, conversions, and new hotel openings.

Total fees were up almost 6% in the fourth quarter, and up nearly 9% excluding the impact of currency with base management fees up over 2% and franchise fees up over 31%. Our incentive fees declined about 3% in the quarter, entirely due to currency translation. So excluding foreign currency translation, incentive fees would have increased in the low single-digit percentage range.

Similar to prior earnings calls, I'd like to take an opportunity to give you a closer look at a key component of Hyatt's business. Our focus this quarter is on our Hyatt Place and Hyatt House brands, and the importance of those brands to our value creation strategy. Hyatt's select service brands have been significant drivers of growth since our IPO. The number of select service rooms in our system has nearly doubled since 2009, to more than 42,000 rooms, across 306 hotels as of the end of 2015.

Included in this total are 241 Hyatt Place hotels, and 65 Extended Stay Hyatt House hotels. Today, the select service brands represent about one-half of our systemwide hotels, over one-quarter of our system-wide rooms, and over 40% of our contracted room base. Roughly three-quarters of the hotels are franchised, and one-quarter of the hotels are managed. We have two lease select service hotels, as we sold the majority of our owned select service hotels at the end of 2014. We also have 16 select service hotels owned by joint ventures in which we are a partner.

Hyatt's select service brands are favored by guests and owners alike. Hyatt select service presence now spans across five continents, 12 countries and over 200 cities. This presence helps create a great network to support our corporate customers, as well as transient guests. These brands are positioned at the top of their respective segments.

The quality that our loyal guest base has come to expect of a Hyatt-branded hotel is reflected in these brands. We've been able to expand Hyatt's presence quickly, with the expansion of Hyatt Place and Hyatt House. As a result of the growth of these brands, following our 2006 launch of the Hyatt Place brand, with the base of converted AmeriSuites hotels, we've added presence in over 150 new markets where Hyatt was not otherwise represented.

This increased distribution has helped drive membership in our Gold Passport program, and expand our business with corporate travel customers. Gold Passport customers account for over one-half of occupied rooms at Hyatt House, and over 35% at Hyatt Place. While our core select service customer base is centered around business travelers, our weekend occupancy has risen to approximately 80%, as families and leisure travelers find their experience at Hyatt Place and Hyatt House of high quality and well-suited to their needs.

In 2015, Hyatt Place was named the highest in guest satisfaction among upscale hotels in a J.D. Power North America hotel guest satisfaction study. Net promoter scores remain very strong for Hyatt Place and Hyatt House, as guests at our hotels are increasingly likely to recommend our brands.

This strong customer reception is evidenced by the brand's operating metrics. Since 2009, Hyatt Place and Hyatt House have grown comparable RevPAR at a compound annual growth rate of over 6%, and we have concurrently realized a more than 500 basis point improvement in gross operating profit margins.

Hyatt Place and Hyatt House have been well-received by owners as well. As preference continues to be a central part of our growth strategy, the Hyatt Place and Hyatt House ownership profile reflects these efforts. We now have 130 ownership groups, with one-quarter of those owning two or more Hyatt Place and Hyatt House hotels, including the most prominent and prolific owners of select service hotels.

Of critical importance, we've continued to innovate. We've reduced the built space per key for both brands over the past two years, and we believe we are now the most space-efficient choice for each of these segments. We've continued to evaluate how to integrate more flexibility in overall space allocation and design into our approach for conversion opportunities. This empathy-based design approach continues to attract owners, especially developers who need a customized solution for their hotel opportunity, not a cookie-cutter approach that may be more commonplace for much larger systems.

With strong relationships among our owners, along with the overall success of the Hyatt Place and Hyatt House brands, our pipeline remains robust. With approximately 23,000 select service rooms in our contracted room base, the number of select service rooms across our systems is poised to increase by more than 50% off of the current base of 42,000 rooms. This is expected, not only to not only add additional points of distribution, but also drive a consistent stream of management and franchise fees in the years to come.

Looking ahead, growth in select service will be focused in urban locations, lifestyle centers, university markets and international markets. As to urban markets, we've opened 25 Hyatt Place or Hyatt House hotels in urban markets over the past two years. This has been a great new chapter of growth for the brands, and we have more than 50 urban select service hotels currently open, and about 40 more in the pipeline. Cities such as Washington D.C., Chicago, Atlanta, Seattle, Baltimore and Denver are now home to our select service hotels.

Expansion into urban markets is reflected in the select service brand metrics. In 2015, our RevPAR for comparable select service hotels in urban markets grew about 8.5%. Urban Hyatt Place hotels have rates that are one-third higher than the brand-wide Hyatt Place average rate. As we open more urban select service hotels, we should see more expansion in rate for the select service system overall.

The strength of our select service brands has helped us serve international markets. We've been successful in gaining great first time representation in markets such as Panama, Nicaragua and Costa Rica, and expanding our existing presence in key markets such as the Netherlands, Dubai, China, India and Mexico. These brands well-position Hyatt to take advantage of the rapidly expanding commercial class in China and India.

Growth in China has been significant, where our base of executed contracts for Hyatt Place and Hyatt House hotels increased over the past two years by 65%. This reflects increased demand for more affordable lodging alternatives. Increased Hyatt Place and Hyatt House growth also allows us to serve many more markets more quickly, as the entitlement and construction process as well as the overall project costs for a select service hotel project are significantly lower than for full service hotels. So with that, I'll now turn the call over to Atish, who will go into more detail on our results for the quarter.

Thanks, Mark. I'll begin with the results in the quarter, then move to our outlook, and finish up with a few items to help with modeling. Let's start with the quarter. In our most significant market, the United States, we saw continued rate-driven growth, as our comparable full service hotel RevPAR increased 4.9% in the quarter. Our hotels in New York City negatively impacted US full service RevPAR by 50 basis points.

Comparable select service hotel RevPAR increased 6.3%. Our increases beat their respective benchmarks, US upper upscale RevPAR and US upscale RevPAR as reported by STR. This was the fourth consecutive quarter that we outperformed the industry.

Mark provided significant color on dynamics around the world, so my only point to add, is that we expanded share. Over the course of 2015, we grew share as measured by systemwide RevPAR index by over 100 basis points. At our comparable owned and leased hotels, RevPAR grew 4.4% in constant dollars.

RevPAR increased over 10% at several of our hotels, in markets such as Orlando, San Francisco, Atlanta and Mexico City. Our hotels in New York City negatively impacted RevPAR growth by about 140 basis points. In other words, owned and leased hotel RevPAR would have been up 5.8%, if you exclude our two New York City comparable owned hotels.

Moving ahead to the margin front. Overall, we were pleased with our comparable owned and leased margin growth in the quarter. We grew comparable margins by 150 basis points in the fourth quarter, off of our 4.4% RevPAR gain in the quarter.

In the Americas, comparable owned and leased margins increased approximately 120 basis points. Strong performance in both rooms and food and beverage margins at owned hotels in Orlando, Mexico City, and Chicago led the way in margin growth. Outside the Americas, comparable owned and leased margins grew 240 basis points, primarily due to an easy comparison to last year.

As to owned and leased margins and EBITDA growth, we have been diligently trying to find more ways to create value from our operating business. We have developed a performance enhancement process in-house, with input from some outside firms. The results from these efforts have been strong, and we are expanding the number of hotels that will go through this process in 2016. We believe this roll out will help drive owned and leased profitability. Selected third-party owners have also engaged with us to apply the process at their hotels as well.

Let me now turn to how our RevPAR and margin performance flowed through to our reported fourth quarter financials. Our adjusted EBITDA grew over 12%, after adjusting for a $6 million impact of transactions, another $7 million for currency, and a non-recurring stock-based compensation expense in the prior year period. We are pleased with this level of growth, as it represented acceleration of over 300 basis points in our adjusted EBITDA growth rate, relative to the third quarter of 2015 on an apples-to-apples basis. For owned and leased hotels, adjusted EBITDA was in the -- up in the double-digit percentage range in the fourth quarter, after adjusting for the impact of transactions and foreign exchange.

Moving on to pro rata share of adjusted EBITDA associated with our unconsolidated hospitality ventures. This increased roughly 6% or approximately $1 million, reflecting a ramp up of resorts within our joint venture with Playa Hotels and Resorts. Moving on to fee revenues. Total fee revenue increased about 6% in the fourth quarter, as compared to the same quarter in 2014. Excluding an estimated $3 million negative foreign exchange impact, fee revenue increased nearly 9%.

A point to note about our fee growth in the quarter is that it reflects the earnings power coming from new hotels added to our system. For example, in 2015 over one-third of our fee growth came from hotels that we have added to our system since the beginning of 2013. As you all know, many of these hotels are still ramping up, given that they've been opened three years or less. Nevertheless, they already represent about 10% of the total fees we earned in 2015. As these hotels, in addition to the ones that we will open this year ramp up, we expect continued high levels of fee growth.

Turning now to adjusted selling, general, and administrative expenses. These expenses were favorable by approximately $22 million in the quarter versus last year. Adjusting for a 2014 expense item related to stock-based compensation, our fourth quarter adjusted SG&A was flat to last year. For the full year 2015, adjusted SG&A increased about 4% on an apples-to-apples basis, that is, adjusting for both the fourth quarter stock-based compensation item, and our vacation ownership business which we sold in the fourth quarter of 2014.

Let me talk briefly about two items of note below adjusted EBITDA, items that impacted our net income. In the fourth quarter, we had $18 million in equity losses related to our unconsolidated hospitality ventures. Two items drove this $[21] million delta versus last year. First, non-cash expenses relating to debt repayment guarantees on three of our joint ventures, and second, non-cash losses relating to currency fluctuations at one of our foreign joint ventures.

Moving on to income taxes. Our effective rate in the quarter was lower than it was in previous quarters. This is a result of better aligning our transfer pricing with our global business operating model. This brought our full year effective tax rate to roughly 36%. In the future, we expect our effective tax rate to be in the low 30% range.

Turning to our balance sheet. We have significant liquidity available. We have approximately $600 million of cash and short-term investments, that's inclusive of approximately $100 million of restricted cash. We also retain undrawn borrowing availability of approximately $1.5 billion under our revolving credit facility.

In 2015, we repurchased over 13 million shares of our stock for an aggregate purchase price of approximately $715 million. Between 2014 and 2015, we acquired approximately $1.2 billion of our stock. We recently announced a $250 million expansion of our share repurchase authorization, bringing our authorization to approximately $340 million. We expect to continue returning capital to shareholders, even as we remain focused on investing in our business.

Now I want to take a moment to talk more about recent trends, and how they shape our thoughts on 2016. As Mark mentioned, systemwide group performance was strong in the fourth quarter. Close-in demand remained extremely strong, and we realized a 17% increase to revenues booked in-the-quarter for-the-quarter. Our group outlook for 2016 and 2017 remains positive.

Group revenue pace at US full service hotels is up in the low single-digit percentage range for 2016. Our 2016 pace has improved slightly since the end of the third quarter. Over two-thirds of our business for 2016 is booked at this time, and our group pace for 2017 for the same set of hotels is up in the mid single-digit percentage range.

Approximately 40% of our 2017 group business is booked at this time. As to corporate negotiated business, we are expecting a rate increase of approximately 7% in 2016. This outcome reflects the expansion of our brand offerings, and increased traction with key volume accounts.

Moving on to our expectations for owned and leased hotels. We expect continued strong performance in 2016. Our hotels in Orlando, Mexico City and Atlanta should do well. Group revenue pace for 2016 at our US owned and leased hotels is up in the 8% to 9% range. This is well above the pace for all US full service hotels, and should bode well for margin performance as well.

Let me now turn to what we're seeing currently. The year is off to a good start, with January results exceeding expectations, particularly for owned and leased hotels. You will note that we provided full year systemwide RevPAR guidance of 3% to 5% on a constant currency basis. We decided to offer our outlook in order to improve visibility into our business, at a time when it may be trickier to project given volatility in some international markets.

With regard to our RevPAR forecast, we want you to be mindful of a few items that may impact the cadence of RevPAR growth over the year. With respect to the first quarter, we want to highlight three items. First, the shift of Easter into the first quarter this year, from the second quarter last year could have an approximate 200 basis point negative impact on US RevPAR growth in the first quarter.

Second, with respect to our group business on the books for 2016, our pace reflects a strong second and third quarter. And third, recall that the comparison is more challenging in the first quarter. Our comparisons get easier as the year progresses.

I would like to mention two last items. First, I would like to remind you that we changed our calculation of adjusted EBITDA effective January 1, 2016. We are now adding back stock-based compensation expense. We are doing so to be more consistent with our peers.

For 2016, we expect stock-based compensation expense to be in the range of $30 million. Our adjusted SG&A expense guidance for the year is approximately $290 million, which excludes stock-based compensation expense. Importantly for modeling purposes, approximately 60% of stock-based compensation expense will be recognized in the first quarter, with the balance spread evenly over the remaining three quarters of 2016. As to historical stock-based compensation expense, I would note that in 2015, we had approximately $23 million of stock-based compensation expense, with over [70%] (corrected by company after the call) of that expense coming through in the first quarter of 2015.

Now that I've taken you through stock based compensation, I will also note that with stock based compensation expense excluded from adjusted SG&A for both 2015 and 2016, our guidance reflects a sub 3% year-over-year increase in adjusted SG&A. This reflects a renewed focus on corporate resource efficiency.

The second item that I wanted to discuss is currency. As to currency, we estimate a headwind based on the forward curves for the basket of currencies in which we earn profits. The implied negative variance to 2015 is in the range of $12 million, with two-thirds of that impact in the first half of the year. This compares to a $26 million total impact in 2015 as compared to 2014. Obviously, given the volatility of currency movements, this figure is simply an estimate based on markets at this time.

To conclude, we are pleased with the results in the fourth quarter. Our growth is reflective of strong RevPAR and share gains, continued positive transient and group demand, and our openings pace which leads to strong fee growth. Our early results give us confidence in another year of growth in 2016. Over the course of the year, we intend to provide more information on key drivers of our business, and during the fourth quarter we intend to host an Investor Day to discuss our long term strategy and financial outlook as well. And with that, I will turn it back to Simon for our question and answer session.

(Operator Instructions)

Your first question comes from the line of Joseph Greff with JPMorgan.

Good morning, all.

Good morning, Joe.

I had two questions. Thanks for the introduction of RevPAR guidance, it's certainly helpful, especially now. When you think about it on a currency adjusted basis at current exchange rates, what does that translate to on a US dollar FX-adjusted basis of 3% to 5%? Then I have a quick follow-up.

Yes, I -- we actually looked at the roll up on a constant currency basis, and I don't think we can give you a affected range on a reported basis.

Okay. Maybe I'll follow-up with Atish later And then, more of a I guess, a big picture question for you, Mark -- and I missed the first 20 seconds of your prepared comments, I don't think you talked about it. I guess, how --my question for you is this Mark, how big is M&A, larger scale M&A focus for you right now, relative to where it was a few months ago? I'll ask in a big picture way?

I guess, we've been asked the various questions about, are you open to, or looking at brand acquisitions, or platform acquisitions and so forth? And our consistent answer has always been, not only is the answer to that yes, but we've actually done such deals in the past. So I guess, I would say it, remains definitely an opportunity for us. And as we look around the world, we're constantly evaluating whether there are places where we could apply capital or expand through M&A, to really establish a platform or expand in a given way. So it -- I don't think its changed materially, as we think about how we look at opportunities over time.

Great. Thank you.

Your next question comes from the line of Steven Kent with Goldman Sachs.

Hi. Just a couple of questions. Are you there?

Yes, Steve, you're pretty faint though. Is there any way you can get closer to your phone?

Yes, hold on a second. How is that?

Okay, much better. Thanks.

Okay. So Mark and Atish, your US RevPAR growth has been very strong in the past few quarters, ahead of your peers, STR. I mean, can you just give us a little bit of what's driving the outperformance, besides superior senior management and great brands, et cetera? (laughter) Is there something different there, that we're missing, because it does really stand out? And then, can you just talk a little bit about, is there a change in last minute traveler or what they look like? Are they changing a little bit faster? Are they using sites like HotelTonight or others to look for that last minute rate change, and then take advantage of it?

Okay. First of all, there are two explanatory variables that you mentioned, sound pretty good to me, so I guess, I'll reiterate that. But I think -- look, we have been very focused on the development of, and deployment of new revenue management tools over the last year, which we did do over this past year. So I guess, you're starting to see the impact of those tools that we've deployed.

I would say our approach hasn't really changed philosophically, because we still believe that local teams need to manage their revenue with data tools and resources that we can provide to them, to enhance their decision-making. But I would say, so the overall approach hasn't changed. I think the tools and the analytical support that we've been able to develop and deploy, because we did do a rollout of a new -- (technical difficulties -- audio ) Okay, that was kind of strange. Steve, are you still there?

Yes, I'm still here.

Okay, I'm sorry. I can't explain that message on the phone. So we actually did deploy new tools as I mentioned (technical difficulties -- audio) Okay, hopefully that will put an end to that.

So the other thing I would say, is that our group performance over the course of the year has been consistently strong. And as you know, we have a relatively robust group business in the US. Relative to near-term or short-term bookings or in-the-moment bookings, in terms of whether there's an increase of the incidents of that over the industry, you'd have to look at the industry data. We have not seen a significant increase or material increase of any kind in that booking window for us. Our channel mix has actually been relatively consistent over the course of the year through the fourth quarter. So we just don't see a significant impact from that near-in same day kind of booking.

Your next question comes from the line of Thomas Allen with Morgan Stanley.

Hi. Can you give us more color on the drivers of the 3% to 5% RevPAR guide? Is it top down or bottoms up? If it's top down, what kind of GDP growth are you assuming? And any more color on the various regions would be helpful? Thank you.

Yes. Sure, Thomas I'll take that one. So it's a good question. So our approach has been the same approach we've used for many years. It's a bottoms up approach to budgeting, it's a comprehensive approach. We budget in the late fall, and roll up a preliminary budget in early December, and then refine that in late in the year, and in early January based on actuals. So that process hasn't changed, and it is bottoms up.

The color I can provide as to regional performance, is that Americas is where we expect the strongest levels of RevPAR growth, frankly, led by the US, with slightly lower growth in Latin America, and the other Americas. Second, in terms of our three regions, would be Asia Pacific RevPAR growth, led by a strong growth in Japan and moderate growth in China as well.

And then relatively speaking, the EAME Southwest Asia region would have the lowest relative level of RevPAR growth. We're seeing some headwinds in Europe, and in the Middle East as well. So I think India should be fine, and perform a little bit better than Europe and the Middle East. So that's kind of the regional break out of that 3% to 5%.

I would -- just if I could take a minute, and just add to that. If you look back over the course of the year, we saw a transient revenue, total transient revenue for -- now I'm just talking about US full service managed hotels to provide a little bit more color for the Americas, for example. Transient revenue was up almost 7%, including rate growth of 5%. Group revenue was up about 7.5%, with rate growth up about 6%. So we see growth across all customer segments.

I think the other key thing that you need to remember or note, is that the close-in corporate demand remains very strong. Our total group production in the fourth quarter was about -- up about 6%. And as Atish mentioned, the in- -the-quarter, for-the-quarter production was up almost 17%. So if you look over the course of the last year, on a weighted average basis, our in-the-quarter for-the-quarter production was up year-over-year about 23%.

So that near-in corporate demand has been a consistent and significant driver of overall demand on the group side for us. And I think that helps to provide a little bit more color on what the profile looked like over the past year, and maybe gives you a little context, for how we think about the business.

And I'll just also add, in answer to the question that Joe asked earlier. Our guidance of 3% to 5% RevPAR growth in constant dollars, the -- on a reported basis, the impact would be about 100 to 125 basis points of foreign exchange. So hopefully, that helps everyone understand the impact of FX.

And that's just based on our current -- the current forward rates.

Correct.

Yes.

That's helpful. And then just following up, on your unit growth, you gave the stats that you opened 49 hotels this year, expecting 60 hotels next year. But we obviously don't know the size of those hotels, or the potential attrition rates. So how are you thinking about your unit growth? And I think you guys reported based off of total system size, when I think a lot of your peers just give management franchise growth, so I think your management franchise growth was closer to 8% not 6%. I mean, should we expect that to accelerate over the next few years? And I guess -- sorry I'm putting a lot in here -- but what are you hearing from developers in terms of the financing environment? Thank you.

All right. First as to growth and attrition, our attrition rates have been very, very low. So we have been -- can't speak for it through the end of 2015, but we look back at this over the last several years, and we were running at below 0.5% per annum over the prior few years. So our quote/unquote, attrition, is extremely low.

And a lot of that, when you look at our system -- I think it's really important to put this into context -- something like if you look over the last, I think it's five years -- is it five? Over the last five years, we have today 40% more hotels in our system than we did five years ago, and about 30% more rooms. I think I'll pause there for a second, because I think when you think about us as a Company in the industry, that's a pretty remarkable measure of current newly opened or completely refreshed -- because if they are conversions, they came with a property improvement plan associated with it. So we have a refreshed portfolio as to a significant proportion of our total base.

In terms of the proportionality, Atish actually mentioned in his comments, what proportion of our fee base is derived from hotels that have opened over the last three years. And he made some commentary about the percentage of growth, which is about one-third of our fee growth year-over-year into 2015 was from newly opened hotels. And that those -- that fee base represents about 10% of the total fee base, and that those hotels obviously are still ramping to some measure. So hopefully, that provides you the proportionality that you're looking for.

And then the last question, I think the last one that you asked was about developers and financing for hotels. I've spent a fair amount of time, sort of catching up with various people on the debt side of the world. And I would say, that it's clear that the costs have gone up a bit, but not materially for reasonably leveraged projects. I think for highly leveraged deals, the costs have gone up more materially.

But for modestly leverage deals, meaning something like 50% loan to value kind of projects, the total costs have gone up maybe 25 to 50 basis points over the last three or four months. So it's not a massive increase. That's, of course, in a US context, and relative to financing for these kinds of projects.

And then, sorry, just to follow-up. And then, in terms of your unit growth, are you expecting it to accelerate over the next few years?

Well, let me just put it to you this way. When you look at our openings, I can think of one owned hotel that is going to open in 2015, and probably a small number of JV hotels. So the vast majority of our openings last year -- actually if you go back a couple years, we opened 43 hotels in 2014 and 49 in 2015. We predict that we will open more than [60] this year.

The vast majority of those hotels will be managed or franchised hotels, the vast majority. I can count on one hand the number of owned hotels over that period of time, and the JV hotels probably another handful. So really not a significant proportion of the total.

Yes. So it's a definite acceleration that we've been seeing, and we expect to continue to see. We'll take the next question, please?

Your next question comes from the line of Bill Crow with Raymond James.

Thanks. Good morning, guys.

Good morning.

Mark, I think you'd mentioned that your special corporate negotiated rates were up 7%. That's a terrific number. How are volumes associated with that? How much of your total demand does that represent, and are there any industries in particular that are driving that strong growth?

Thanks, Bill. It's Atish. So I would say that overall, it represents about 10% of volume roughly, and we're seeing strong increases from many sectors. But pharma continues to be really strong, technology is very strong. So those are a couple of areas where we're seeing strong levels of growth.

Yes, obviously on the other side of the equation, and this will shock no one on the phone, but energy companies are on the other side of that coin.

Is there a trade-off between agreeing to higher rates, but maybe given more flexibility on actual demand or rooms used?

Terms really on that side haven't changed. If anything, they've both remain the same, and maybe tightened up a little bit over time.

Okay. And one final question for me. Mark, does the fact that we're sitting here late cycle, and we've got a lot of economic, political turmoil going on, does that change the way you think about capital recycling, your willingness to buy assets like you've done in the past, or maybe increase the urgency to sell the owned assets that remain? Any change to your philosophy from that perspective?

Not really. We've always talked about recycling through the cycle. We are in a point now, as I look out, we've seen an increase in opportunities actually over the last several months, the number of properties that are coming to market, in markets on which we are the most focused, have increased actually. We continue to focus on the four areas that we've always talked about, which is key gateway cities, resorts, convention hotels and selected convention markets, and then urban select service hotels. And by way of markets, we've talked a lot about the fact that we are really focused on expanding in LA, Miami and London.

On the sale side, we don't have any properties listed for sale at this point. Having said that, we regularly have dialogue with buyers of hotels who have expressed an interest in one or more of our hotel properties. So as to recycling overall, I would say we've always imagined and believed that recycling through the cycle is a good idea. And we had a very modest year last year, so we could well see an increase in 2016 over a pretty quiet 2015.

All right. Thanks for your time.

Your next question comes from the line of Smedes Rose with Citigroup.

Hi, thanks. I wanted to ask on your appetite to buy and sell as well? As you look out, have you seen any changes in pricing, in some of the markets that you talked about, where you would like to have more presence?

I would say, we're paying a lot of attention to what kinds of buyers are coming into the marketplace. I think there's a big dichotomy between the select service market, and what's going on there, and the full service market. I think that both for financing reasons and capital formation reasons, meaning private REIT capital formation, and public REIT trading levels, the marketplace on the select service side has backed up a fair amount over the last 12 to 15 months.

On the full service side, you've seen a maybe an evolution -- I was going to say rotation, but that sounds predictable and structured. It's more like an evolution of different kinds of buyers, from different places around the world. So I haven't really -- I don't think there's anything that I would point to, that I would call a trend, or something that is able to be extrapolated to be some kind of a market-wide comment. I think the fact remains that, great assets and great markets and great locations remain in demand. And there are enough buyers in the world for those kinds of assets that, that pricing will be firm for great assets. That's the way I think you should think about it.

And in the markets, we're talking about, it's not as if you've seen that many trades [print]?

That's true. That's true. The volumes not been that high. (multiple speakers)

It's hard to get that gauge.

Okay. Thank you. Are you able to share your -- you mentioned your RevPAR index brand-wide. I guess can you share it for Hyatt Place and Hyatt House, or maybe on a combined basis or?

I don't know that we've got that.

Yes, we don't have that handy. But I think that -- I mentioned that we'll be doing an Investor Day toward the end of this year, and I think that's a time where we might more comprehensively talk about index across our brands, and the progression we've seen, just in a more comprehensive way than on a call.

Okay, thanks. And then just one final, and I want to ask you, as we -- as of the end of the year, how can you break down many A shares and how many B shares are outstanding? And in the quarter, in your buyback, what was the split between the A and the B?

So as to the quarter, fourth quarter, it was all A shares. And I can give you -- kind of where we sit, as of the end of last week in terms of share count, maybe that will help. We had approximately 135.2 million shares outstanding, and 25.6 million were A shares and 109.6 million were B shares.

Thank you.

You're welcome.

Simon, we'll take our last question.

Certainly. Your last question comes from the line of David Loeb with Baird.

[For a minute], I thought you were going to just skip me. Just to continue on about the buyback program, your current authorization represents about 30% of the outstanding class A shares, I guess, more than that. How do you see managing the float versus continuing to buyback class A shares?

Look, you know that we've looked at the share repurchase capacity, as a tool in our toolkit for return of capital to shareholders over time, and it has worked well for us in that way. We're of course, aware of our float, and the trading volumes of the stock.

Overall, I would say, the way we look at it is, that the increased authorization, we view it as a part of the overall capital planning for a year. It's a year in which we might well see increased activity on the asset recycling front, so we're paying attention to that. And also we can't predict, necessarily when additional B shares might become available for purchase. So I think what we are paying attention to is, where our capital base is, what our trading volumes look like, and where the float is, relative to what the potential opportunities may look like over the course of the year.

Mark, if I can follow up, and let me just ask that from a 90-degree angle? There are investors who see your buyback program as sort of a creeping take private. You said that's something you watch, but what's your view on how important it is to -- on one hand continue returning stock, returning cash to shareholders? And on the other hand, maintaining some public size, and maintaining the status as a publicly-listed Company?

Right. Well, look, as I said we're aware of our capital base, the current float, and trading levels of the stock. And we are considering this, in evaluating the overall capital strategy. But I would also add -- and I think this just reiterates what you've just heard on the call, and what we said consistently over the last five years -- and that is we remain focused on building long-term value, long-term shareholder value, and included in that is growing our platform.

We've been obviously, active investors in our own business, and we also continue to build our ability to expand our brands around the world, with a lot of additional resources. So our investment profile is very dedicated to future growth, and to building value over time. That's really our focus.

Okay. Do I have time for one more?

Sure.

Thank you, Atish. Do you have an update on $[7.5 billion] in owned hotel value that you've given in the past, particularly based on what you're seeing in the transaction market today?

Yes, David, that's a good question. We first, provided an estimate of owned value to be helpful to investors at our Investor Day back in 2014, early 2014. And we updated it last year, when we were doing kind of a deeper dive on our call, about owned and leased assets, just to give a sense of value given that we had traded a lot of assets, both on the buy and sell side in 2014.

It's not something we do on a quarterly basis. And I think it's a good question, and one we will address in the context of our Investor Day at the end of this year. But as you know, given that you cover a lot of the lodging REITs, it's difficult to pinpoint values across an entire portfolio, and around the world on a quarterly basis. So I think look towards us, and towards the end of the year to provide a more detailed assessment. But for now, I don't think there's any updates with regard to that.

Yes, I would just point out that, at a point in time, it's -- there are a lot of factors when -- that you'd take into account, in actually doing that assessment. I guess, one of which would need to be, looking at how the public market is valuing real estate -- hotel real estate at this point in time as well. So I would just say, that it's clear, that there's movement from time to time, sometimes volatile movement, as you've seen recently.

So I guess, what I would say is, it's probably something that should be taken as a point in time estimate -- as a point in time estimate. And as Atish mentioned, I think when we dedicate more time in the Investor Day, we'll definitely revisit this and update everyone on the portfolio as well, which has changed quite a lot over the last 1.5 year since we had our last Investor Day.

Great. Thank you both. And Atish, great to have had you in CFO seat for awhile.

Thanks very much, David. Appreciate it.

Well, thank you everyone for joining us today. We look forward to talking to you soon. Goodbye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.